• Maintain NEUTRAL and MYR21.70 TP, 6% upside with 6% FY25F yield. Allianz Malaysia’s 9M24 results met our expectations, but missed the Street estimate. While underwriting margins remained muted on the back of elevated claims, this was offset by a sustained strong investment performance and continued topline strength. We make no changes to our earnings forecasts, TP and recommendation for now, but see scope to turn more positive on the counter – its defensive traits could help investors tide through the current volatility in the market.

• Results review. ALLZ’s 3Q24 net profit of MYR183.2m (+10% QoQ, -7% YoY) brought the 9M24 figure to MYR540m (+1% YoY) – this came in line with our full-year estimate, but missed that of the consensus. 9M24 insurance revenue climbed by 14% YoY, thanks to double-digit revenue growth from both the general and life insurance segments. However, a continued rise in claims incurred by both segments led to a 3-ppt underwriting margin compression. At the same time, while investment returns surged by 59% YoY, adverse adjustments from FX movements on investment-linked funds led to flat bottomline growth.

• Allianz General (AGIC) – a sequential rebound. AGIC recorded a 3Q24 PBT of MYR139.5m, up 20% QoQ (-1% YoY). This was largely driven by a QoQ moderation in claims, as 2Q24 saw several large-ticket claims from the fire and engineering classes of business. Meanwhile, general insurance sales continued to grow, with the segment recording gross written premiums growth of 12% and 14% for 3Q24 and 9M24, from motor insurance.As of the latest available data, AGIC maintained its pole position in the domestic general insurance industry, with a 14.6% market share.

• Allianz Life (ALIM) – continued topline strength. Annualised new premiums (ANP) for the segment increased 16% YoY in 9M24, surpassing the industry average of 11%. Of its various distribution channels, ALIM’s bancassurance partners recorded the strongest ANP growth of 57% YoY. The strong sales growth allowed the contractual service margin to expand by 11% YoY (QoQ: +1%), which is positive for future earnings. Elsewhere, the segment continued to record a sterling investment performance, with investment returns (net of finance expenses) up by almost two-fold. As such, despite continued pressure on underwriting margins (-3ppts YoY), the segment was able to record PBT growth of 7% for 9M24.

• We make no changes to our earnings forecasts and TP pending ALLZ’s analyst briefing later today. However, there could be upside risks to our TP, as a recent general insurance M&A was conducted at a higher P/BV than the one we currently ascribe to AGIC. For now, our unchanged TP of MYR21.70 includes a 6% ESG premium.

Source: RHB Securities Research - 25 Nov 2024